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POTLER v. MCP FACILITIES CORP.

June 8, 1979

B. Marvin POTLER, Esq., as Trustee in Bankruptcy for Underwater Advisors Corporation, Plaintiff,
v.
MCP FACILITIES CORP. and Bethlehem Steel Corporation, Defendants



The opinion of the court was delivered by: BARTELS

Plaintiff, B. Marvin Potler, as trustee in bankruptcy for Underwater Advisors Corporation ("UAE"), brings this diversity action *fn1" against MCP Facilities Corp. ("MCP") and Bethlehem Steel Corporation ("Bethlehem") to recover $ 81,250 in damages, including expenses and lost profits, allegedly suffered by UAE as a result of its inability to complete an underwater painting job for Bethlehem at Beaumont, Texas. Plaintiff's claim against MCP, from which UAE purchased the underwater paint called "Steelmate," is for breach of warranty arising from the failure of that paint to adhere properly. His claim against Bethlehem, for which UAE agreed to perform the underwater painting services, is for breach of contract stemming from the alleged requirement by Bethlehem, in its plans and specifications, that UAE use Steelmate. Both defendants, MCP and Bethlehem, move pursuant to Fed.R.Civ.P. Rule 56 for summary judgment.

MCP's motion is predicated upon six grounds which invoke the application of various provisions of Article Two of the Uniform Commercial Code ("UCC"): (1) the action is barred by the statute of limitations; (2) there can be no liability for breach of express warranty because (a) UAE could not have relied on any representations by MCP and (b) any evidence pertinent thereto is barred by the parol evidence rule; (3) there can be no implied warranty of fitness for a particular use because UAE could not have relied on MCP's skill or judgment; (4) UAE's reservation of a right to inspect negates all implied warranties; (5) all warranties were expressly excluded; and (6) remedies were limited to replacement of defective paint. Bethlehem's motion is predicated upon the ground that Texas law precludes recovery. Plaintiff opposes the motions and contends that there are material issues of fact to be tried.

 FACTS

 In July 1971, Bethlehem revised its plans to renew the fender system of the 1,100' bulkhead at its Beaumont, Texas yard to include a coating of the underwater piles with an anticorrosive paint. On February 2, 1972, Bethlehem issued plans and specifications for the Beaumont job, including anticorrosive painting. Section 7 of the plans and specifications requires that the paint system used at the Beaumont job be "Steelmate" as manufactured by MCP or an "approved equal," with such approval to be granted prior to the award of the contract.

 Bethlehem had previously used Steelmate, for example, at its Key Highway Shipyard in Baltimore, Maryland, and had tested and commissioned tests of Steelmate and the water at Beaumont. On January 27, 1972, it sent to MCP for review information concerning the water at Beaumont. On February 7, 1972, MCP certified to Bethlehem that B.C. Research, to which MCP had sent the information, found nothing in the water at Beaumont that would affect Steelmate.

 The plans and specifications additionally provide at paragraph 13 of the General Conditions:

 
"Bidder should carefully examine the plans, specifications and other documents, visit the site of the work and fully inform himself as to all conditions and matters which can in any way affect the work or costs thereof. Should a bidder find discrepancies in, or omissions from the plans, specifications or other documents, or should he be in doubt as to their meaning and intent, he should notify the Owner at once and obtain clarification prior to submitting a bid. The submission of a bid by the bidder shall be conclusive evidence that the bidder is fully acquainted with and satisfied as to the character, quality and quantity of work to be performed and materials to be furnished."

 On February 2, 1972, Bethlehem forwarded copies of the plans and specifications to its purchasing department in Beaumont with instructions to obtain a minimum of six bids for the work. On February 8, 1972, UAE wrote a letter to Bethlehem at Beaumont in which it referred to a telephone conversation of the previous day, proposed to perform the coating services at Beaumont, submitted its prices, and described its experience applying Steelmate underwater on another Bethlehem job:

 
As you are probably aware, we recently completed the painting of approximately 28,000 square feet of steel H-pile in Bethlehem's Key Highway Shipyard in Baltimore. No one has anywhere near the experience that we have in applying this material under water. I can tell you from experience that learning the technique of applying this product under water can be costly. We have mastered this technique and are hereby offering an unsolicited proposal to perform this service.

 The Key Highway job was performed by UAE with Steelmate ordered in July 1971 from MCP, which, according to UAE, represented that it would adhere, and was UAE's only experience with Steelmate prior to the Beaumont job as well as its first application of paint underwater. At Key Highway, Steelmate adhered temporarily at first but, after a few months, no longer did so. *fn2"

 In response to its February 8 letter, an invitation to bid was forwarded to UAE on February 15, 1972. The invitation to bid includes a paragraph identical to P 13 of the plans and specifications quoted Supra as well as the following:

 
Where any material is mentioned by trade name, manufacturer's name, or model numbers and catalog numbers, the same is not a preference for said material but is used to establish a desired type or quality of material. Materials and equipment of other manufacturers which are the equivalent or better in quality will be accepted by the Company. The successful bidder shall submit in writing to the Company's Purchasing Department a list and description of all materials and equipment which he proposes to substitute for the material specified and no substitution will be Permitted except that for which written approval is granted by the Company's Purchasing Department.

 UAE officers and employees visited the Beaumont job site and saw what work was to be done and where and how it would be done. UAE did not test Steelmate but, UAE contends, it had conversations and correspondence with MCP concerning Bethlehem's requirements and the ability of Steelmate to perform. According to UAE, it informed MCP of the intended use of Steelmate and MCP represented that the product would be able to perform the Beaumont job.

 On March 3, 1974, UAE wrote Bethlehem that, after having "carefully examined" the specifications for the Beaumont job, it was proposing a joint venture with Coastal Construction Company ("Coastal") to do the fender and coating work. Coastal was to do the fender work and UAE, using the same divers who had applied Steelmate at Bethlehem's Key Highway Yard, was to do the underwater coating. After final negotiations in Beaumont, on April 17, 1972, Bethlehem, UAE and Coastal executed the contract for the Beaumont job in Texas. That contract specifically incorporates the plans and specifications and provides in paragraph 17:

 
The Contractor hereby represents that prior to the execution of this Agreement it has visited the Site and that opportunity has been given to it for, and it has made, any and all investigations desired relative to the condition of the Site and the character of the Work and the condition and circumstances under which the Work must be performed, and, furthermore, that it has examined and clearly understands the plans and every clause and section of this Agreement and of the specifications hereto attached. The Contractor agrees that it will not make any claim for any extra compensation, damage or extension of time for completion based upon any alleged misunderstanding of this Agreement or of said plans or said specifications or because of lack of information concerning, or alleged misrepresentation of, the condition of the Site, the character of the Work or the conditions under which this Agreement is to be performed.

 UAE claims that it requested Bethlehem to make an investigation of a substitute for Steelmate. As early as May 1971, UAE wrote Bethlehem informing it that a representative of International Paint Company would be in touch concerning its marine paints. No substitute paint system was approved by Bethlehem.

 To carry out its contract with Bethlehem, UAE purchased 450 gallons of Steelmate from MCP. Pursuant to UAE's directions (confirmed subsequently by UAE's purchase order dated April 25, 1972 and received by MCP on May 1, 1972) MCP delivered the first shipment of approximately 200 gallons of Steelmate to Eastern Express, Inc., ("Eastern") at Bath, Pennsylvania on April 26, 1972. That first shipment was delivered to Bethlehem for UAE at Beaumont on May 5, 1972. According to UAE, its transaction with MCP continued until July 1972. A Steelmate brochure, dated August 1971, and the labels of every gallon of Steelmate contain the following language, of which UAE denies knowledge:

 IMPORTANT NOTICE TO PURCHASER

 
The following is made in lieu of all warranties, expressed or implied. Seller's and manufacturer's only obligation shall be to replace such quantity of the product proved to be defective. Neither seller nor manufacturer shall be liable for any injury, loss or damage, direct or consequential, arising out of the use of or the inability to use the product. Before using, user shall determine the suitability of the product and its intended use, and user assumes all risk and liability whatsoever in ...

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